Faith-based (ka-ching!) banking frowned upon by God

N.M. substituting for AL

… and the FDIC.

Real Estate Lender Is 10th Bank to Fail This Year [NYT]

Likely presence of fraud too- so the FBI should sharpen their knives. Surely there will be more, many more, such failures. A fitting legacy for the faith-based (ka-ching!) president…

Going Down in Central Cali

Damn fine coffee

FNM had a risk manager? Zounds! [Bloomie]

Conventional reasoning: if the CFO goes, it is time to short the stock like a motherfucker. [Bloomie]

Market up last two days which belies the fundamentals. Welcome to La-la-land. Is the market is rigged? [Mish]

The Federal Reserve is in business to create moral hazard.

The Swelling Tide of Toxic Home Loans Is Proving to Be Even More Worrisome than Initially Feared [Financial Armageddon, A Smart Straight Shooter]

Why aren’t any of the major candidates talking about a solution to the credit crisis? Simple: there ain’t one. [Aleph blog]

Confirmation of the US imminent financial collapse: Waffle House declares bankruptcy. [Shenandoah]

The slow moving train wreck: It’s just the beginning of the end [The Independent UK]

Prime foreclosures surge past subprime foreclosures for first time [Housingwire]

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“We are subsidizing way too many zero return institutions; cheap mortgages for the uncreditworthy, jobs for the unproductive, and entitlements for the parasitic.”

Odds and sods

Get your free housing before the market freezes up. [Market Ticker]

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Momentum
You may have heard of a Minsky Moment [Wikipedia], you may also be aware of the Kennedy moment [Exurban nation], but were you aware of the Suez moment [Option Armageddon]?

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Who’s buying houses today?
Scamsters, apparently- fraud is up 42%.  Hell, if it wasn’t for fraudulent activity, the housing market would be even deeper in the toilet than it already is. Thanks to Yun, Frank, Hank, Greenspank, and Bukkake! [CNN][LAT]

Hell, the FBI knew scams were on the increase waaaaay back in 2004, and yet did nothing. Again, this is the sort of revelation which only underscores how slack federal law enforcement in this country has become.  [digitaljournal][The Market Ticker]

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The Market is rigged? [youtube]

The weight

Warming up in the bullpen

Buiter Provokes Wrath at Jackson Hole, Says Fed Too Close to Wall Street [Nakedcapitalism]

Go Willem Buiter! The London School of Economics prof and former Bank of England and European Bank for Reconstruction and Development official has been saying for some time that the Fed suffer from s “cognitive regulatory capture” and has been far too responsive to the needs of Wall Street. It’s been puzzling to watch his detailed, well argued criticisms go unnoticed, particularly when they have been offered at forums where one would think they’d be impossible to ignore (for instance, a conference co-hosted by the New York Fed where Buiter presented a pretty harsh paper on what he called the North Atlantic Financial Crisis).

Well, he finally seems to have gotten through, perhaps because he is forward enough to criticize Fed officials to their face at an event they are hosting. Or maybe it’s because the pattern of conduct he decries is so patently obvious that the key actors can no longer fool themselves.

Also: Fed Attention to Wall Street `Dangerous,’ Buiter Says, Bloomie

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Got deriviatives?

When over-the-counter derivatives began to gain traction in the financial world, Wall Street insiders and industry regulators constantly proclaimed their virtues — and ignored their shortcomings.

Among other things, they argued that these paper promises would allow complex risk to be broken down into its constituent parts and redistributed to those who wanted and understood the exposure they were taking on.

In truth, no one really knew what it was they were slicing-and-dicing, what new risks were being created in the process, and where all this stuff was actually ending up.

Proponents also claimed that new age finance would make the financial system more resilient because risks would be disbursed far and wide, rather than being concentrated in a small number of institutions or portfolios.

Again, those who were allegedly in the know failed to take account of the fact that in a tightly-connected world, serious problems in one part of the system would invariably spill over and affect other parts.

We now know, of course, that many proponents of Frankenstein finance were clueless charlatans or greedy insiders creating smokescreens that helped facilitate a major Ponzi scheme.
[Worsening the Fallout, Financial Armageddon]

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Freddie, Fannie Failure Could Be World `Catastrophe,’ Yu Says

A failure of U.S. mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system, said Yu Yongding, a former adviser to China’s central bank.

“If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,” Yu said in e-mailed answers to questions yesterday. “If it is not the end of the world, it is the end of the current international financial system.” [China Expects Adequate Compensation for the Failure of Freddie and Fannie .... Or Else]

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“It sounds like even the firms that aren’t in trouble are in trouble.” -Tom Wolfe

I resemble that remark

[Hat tip]

Got memo?

Help the old fool

count his homes:

“It’s like discovering plutonium by accident!” -George Costanza

A Few Speculators Dominate the Vast Market for Oil Trading
How is speculation driving up the price of oil? Ask Goldman Sucks (You could ask Enron but they’re dead, yet their legacy lives on!). [Jesse's Café Américain]

“Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses.

“But when the Commodity Futures Trading Commission examined Vitol’s books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising to the commodities markets was the massive size of Vitol’s portfolio — at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange.”

Ay caramba!

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Even a broken clock is right twice a day
Myron Scholes (Long Term CapitalManagement) predicted “the yearlong credit squeeze will inflict more pain on the world economy and financial markets.” [Bloomie]

“The crisis is ‘not over and I’m not exactly sure when it’s going to end,” Scholes said today at a conference in Lindau, Germany, featuring 14 Nobel laureates in economics. McFadden said in an interview ‘that as the crisis continues you will see a lot of business failures.’ “

No, ya think? Way to call ‘em as you see ‘em, Mr. Nobel Laureate. Even I could see this coming 2-1/2 years ago, and I ain’t got no formal ecumenical edumacation in the arts of debt money thievery intelligent markets highly efficient markets dollar cost averaging borrowing money because I don’t have any today to buy things I don’t really need to impress people I don’t even know financial engineering alchemy.

Myron, if I may be permitted to use the familiar tone your laureate-ship, I think this guy is wise, you should listen to him:

“It’s not over until it’s over.” -Yogi Berra

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Oil, Dollar Lead Commodities Index Toward Biggest Weekly Gain in 33 Years [Bloomie]

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Jim “commodites get me hard”  Rogers interview [Money Morning]

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America: playing musical deck chairs on the Titanic since 2000.